Consolidation Keeps Logistics Alive in the U.K.

The majority of the United Kingdom’s largest logistics companies are now overseas owned and account for the greatest share of turnover with further industry consolidation predicted, according to new research from Barclays Corporate and Grant Thornton.

Overseas ownership of the top 50 U.K. logistics companies has grown to 52% over the past five years with their turnover now equating to 69% of the top 50’s total turnover, a jump of more than 40% over five years.

Barclays Corporate and Grant Thornton carried out research looking at the changing composition of the top 50 U.K. logistics companies, surveying key decision makers from U.K. logistics businesses on their views of the industry.

The research shows that 58% of respondents believe M&A activity in the sector will increase over the next 12 months, with over a third of those companies surveyed actively planning acquisitions.

Philip Bird, Corporate Finance Director at Grant Thornton comments; “Many medium-sized U.K. logistics firms need to consider mergers or acquisitions to avoid being squeezed out by major operators offering economies of scale or niche players offering tailor-made solutions. U.K. logistics firms need to be more successful in expanding overseas if they want to remain independent. After all, more than two thirds of the UK’s top 50 total turnover is generated by firms based outside the U.K.”

Over three quarters of respondents will be investing in vehicles over the next 12 months, which can be seen as a result of rising fuel costs. 83% of businesses are concentrating on improved vehicle efficiency as a measure to counter rising costs, however only 15% of businesses surveyed are currently hedging against fuel prices.

Rob Riddleston, Head of Transport and Logistics at Barclays Corporate comments; “The logistics sector is always going to have to face the vagaries of the foreign exchange markets and fuel price volatility. Whilst fundamental movements in FX and fuel rates have to be managed by the sector, companies can hedge against short and medium term volatility in price movements.”

The research shows that overall the U.K. logistics industry has been resilient despite the recession with employment figures back to 2007 levels and operating margins holding up well throughout the past five years. 66% of logistics businesses surveyed expect up to 10% growth over the next year, while almost half (47%) intend to increase staff numbers.

When asked about government support, 82% believe U.K. Government is not supportive enough of the sector, with the majority of respondents calling for a cap or reduction in fuel duty.

Rob Riddleston concludes; “It is pleasing to see that despite the headwinds of the last three years the industry is looking forward positively to the future. The logistics sector is the vital element in helping world trade grow and the U.K. economy to become more efficient.”

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